Housing market crisis: Landlords and investors in the rental space are thriving, top real estate leader says
It's no secret that we're in the midst of an affordability crisis in the housing world. Things have not been the same since the beginning of the pandemic; House prices high and Mortgage rates Also high. For some, the idea of owning a home has become more distant, if not non-existent.
So what do people do if they can't afford a home? They rent one.
“When you think about the affordability crisis that is really happening in the U.S. today, it benefits the rental market,” said Laurel Durkay, head of listed real assets at Morgan Stanley. Interview with CNBC last week. “You said it was moving from the American dream to a pipe dream, which is providing an opportunity for rental property owners to be able to bridge this gap in affordability,” she continued, referring to an earlier comment made by the anchor.
Institutional investors entered the single-family rental space in the wake of the Great Financial Crisis due to the number of homes going into foreclosure; They bought them in bulk at a cheap price. Although it succeeded in preventing the housing market from bottoming out, it benefited greatly. Years later, they are still benefiting – only now, because housing has become unaffordable.
In the latter half of last year, Ermengard Jaber, chief economist at Moody's Analytics, said: luckThe single-family rental market is the “star of today and tomorrow” for investors.
Jaber explained it perfectly at the time: People want to live in a house, they want a backyard, they want to be near a good school district for their kids — and if it weren't for the unprecedented and rapid decline in affordability, they would be able to. Maybe he was able to get just that. “They want the traditional American dream, and they may not be able to afford it, but they can afford it by renting a single-family apartment,” Jaber said.
This does not appear to have changed.
In terms of investment, “I think the most attractive right now, taking everything into account, will be the single-family rental market,” Durkay said. She added that some multifamily homes would also be considered a good investment, but because of the recent boom in multifamily construction, particularly in the Sunbelt, rents have generally stabilized, or declined in some cases. Rents are still well above pre-pandemic levels, but according to Capital Economics, renting will be cheaper than buying for years, especially with home prices reaching all-time highs almost every month.
When it comes to owners, they refer more to institutional owners (also called institutional operators or institutional investors; take your pick). Durkay mentioned Las Vegas REIT American Homes 4 for rent, which said it manages about 60,000 homes and is a developer of single-family homes as well. “They were one of the first institutional players to develop single-family homes exclusively for rent, and this provides them with a multi-year runway for future growth that they will be able to capitalize on, and it really kind of helps with the affordability crisis,” she said. “When you think about In AMH renting a home, owning a home in AMH markets is 25% more expensive.”
Didn't delve into it further, but as… luck As noted previously, most estimates place institutional ownership at less than 5% of single-family rentals and less than 1% of all single-family homes. However, this is not the whole story. For example, in Atlanta, a so-called desirable market, Wall Street owns more than 4% of all single-family homes. It can be an important factor in rising housing costs.
Later, Dorkay mentioned AvalonBay, a multifamily real estate investment trust and one of the largest apartment owners in the United States. “In the Avalon Bay markets, the median home price is over $800,000, so the affordability in those markets is much lower than you would expect,” she said. All parts of the country will see… owning a home in their markets is approximately 95% more expensive than renting.
Here's the thing, it's all great for investors and home builders. And while some might suggest that this is great for Americans too, because they can rent and live in the homes they want, they are still renting because they can't afford homes. Owning your own home is one of the core tenets of the American Dream, and in today's environment, it's not easy.
